Farley Having Trouble Closing Pepperell Deal

January 11, 1990|By Pamela Sherrod.

Chicago industrialist William Farley, who last year won a hostile nine-month takeover fight for textile firm West Point-Pepperell Inc., is having trouble winning the financing he needs to complete that merger.

In a Securities and Exchange Commission filing this week, Pepperell said it won`t get as much as it had hoped in the sale of its Cluett Peabody unit to reduce the estimated $1.4 billion in debt used to buy Pepperell`s stock.

Pepperell had hoped to get $600 million in selling Cluett Peabody to Bidermann USA, a subsidiary of the France-based clothing manufacturer. Instead, Pepperell said in the SEC filing it expects to get about $520 million in cash and notes for Cluett.

Farley, Pepperell`s chairman, said last October when the agreement to sell Cluett to Bidermann was reached that Cluett`s sale as well as other asset sales would result in cash proceeds of about $700 million.

``The $600 million is still correct,`` Gene De Nicolais, a spokesman for Bidermann, said Wednesday. ``No other price has been released on our part. In any acquisition, price is an issue. I won`t be privy to anything different in price until the actual closing.``

Pepperell and Bidermann now hope to complete the Cluett sale by the end of this month. The deal first was expected to be completed by the end of last November and then the end of last year.

Bidermann declined comment on its financing plans, but said the delay has had nothing to do with its ability to finance the purchase.

``The delay does not indicate that we`ve had problems with financing,``

said De Nicolais. ``If anything the delay has been because of the mountain of paperwork involved.``

But the delay may be linked to the decreased popularity of high-yield bonds, commonly known as junk bonds.

A source at Bidermann, who asked not to be identified, said: ``Any plans the company had of relying on the longtime-ago issue of junk bonds is out of the question. The company still has several options and has certain private investors.``

Farley, who bought 95 percent of Pepperell`s shares last spring, made that purchase with temporary financing, composed of bank loans and junk bonds. He had planned to buy the remaining 5 percent and obtain permanent financing to replace the temporary financing before the end of 1989.

Pepperell said in its SEC filing that it is pursuing a plan to provide permanent financing to replace its interim loans, to finish the merger with Farley`s holding company and to meet anticipated working capital requirements. If Pepperell is unable to arrange permanent financing before the interim agreements expire, the company said ``it will be required to obtain alternative sources of financing for these purposes.``

Pepperell also said in the SEC filing that the banks that provided a $1.03 billion ``bridge`` loan for Farley`s acquisition agreed to extend the loans until March and possibly June in exchange for higher interest rates. The banks are led by Wells Fargo Bank and Bankers Trust Co.

But Pepperell said in the filing that ``there can be no assurance that it can satisfy the bank`s conditions`` to extend the loans until June.

Pepperell also is having trouble on Wall Street. The company`s stock closed Wednesday down $1.37 at $36.12. Pepperell stock is off $21.87 from the $58 a share, or $1.56 billion, Farley`s acquisition company paid for Pepperell last spring.